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Title :

A History of the Nigeria Deposit Insurance Corporation (NDIC) and its Role in the Banking Sector of Nigeria Since 1988

Authors :

Yasin Abubakar

A Deposit Insurance Scheme? (DIS) is an arrangement whereby a designated agency (usually government- owned) guarantees deposits in the insured financial institutions. The guaranty is usually limited to discourage moral hazard, a situation whereby the financiers and depositors would care little about the safety of the deposits because such deposits are fully insured. Most deposit insurance agencies act as liquidators of failed insured institutions while some, in addition, act as supervisors of insured institutions as well. In Nigeria, the decision by the Ibrahim Badamasi Babangida (I.B.B.) led Federal Military Government to establish the Nigeria Deposit Insurance Corporation (NDIC) in 1988 was informed by a number of factors chief of which was, the country?s past bitter experience of bank failures. It was Decree No. 22 of 1988, which established the corporation to ensure deposit liabilities of all licensed deposit-taking financial institutions in Nigeria. Thus, the corporation was introduced following the deregulation of the financial sector under the Structural Adjustment Programme (SAP) in 1986, to provide a further layer of protection for depositors and promote financial stability, by complementing the supervisory activities of the Central Bank of Nigeria (CBN) in ensuring a safe and sound banking system. The aim of this paper therefore, is to highlight factors responsible for establishment of the NDIC by the I.B.B led military administration in Nigeria, mode of operation of the corporation and effects of its establishment on the banking sector of the country in particular and the financial sector as a whole. It will be shown in the paper that the corporation has during nearly thirty years of its existence, successfully minimised fear of distress and failure of banks from the minds of Nigerians and relatively restored their confidence in the banking sector.